In the Mozambique government’s bid to attract foreign investment and multiply about $3-billion that has been injected into the country over the past five years, it is steering away from nation- alising its minerals, of which coal is a significant drawcard.

This is in stark contrast with countries such as Zambia and Ghana, which are moving to extract more taxes or royal- ties from miners, and Zimbabwe, which is moving to force miners to surrender majority stakes.

“That is the reason everyone is getting excited about Mozambique. One of the main incentives is the fact that the government is so open,” senior independent coal analyst Xavier Prevost told Reuters.

Meanwhile, the Mozambique govern- ment announced in November that it would not amend the taxes and royalties system under the current law and would submit a draft of the revised mining legislation for approval by the end of this year.

This is part of the State’s bid to streamline procedures and attract investment to its booming coal sector, said the country’s Minister Esperança Bias.

The new law will be aimed at speeding up the licensing process and the simplification of rules for mining companies planning to operate in Mozambique.

The country is also seen as a low-cost producer, as it has not been plagued by the steep hikes in wages and electricity tariffs, which have hit neighbouring Southern African states.

However, the strong metical, up almost 20% this year against the dollar, could pressure mining margins, as costs are mostly paid in the local currency, while coal is priced in the US dollar.

Meanwhile, industry experts and role-players have expressed concern over the slow rate that infrastructure upgrades are taking place in Mozambique and the effect thereof on the country’s booming coal sector.

Many believe that the country’s struggle to rebuild ports, roads and railways will result in Mozambique’s coal reserves being exploited too slowly.

As companies gear up to bring their projects into production, they are faced with limited capacity on the 575-km-long Sena railway line linking the country’s Tete province with ports.

Ongoing upgrades on the rail line will take years to create the effect needed to meet demand from mining houses such as Vale, Rio Tinto and the like, which are setting up coal operations in Tete.

Upgrade Projects

South African logistics group Grindrod recently expanded the capacity of the Maputo port’s Matola Coal Terminal to between six-million tons and seven- million tons. The company is now finalising the feasibility study to potentially add 20-million tons to the terminal’s capacity by late 2014.

Mozambique’s ports and railways company, CFM, expects to complete the much-delayed refurbishing of the 600- km-long Sena railway line that links the Beira port with coal mines in Tete, by early 2013. After the upgrade has been completed, the line will be able to carry about six-million tons of coal a year.

A further upgrade is planned to increase capacity on the line to between 18-million tons and 19-million tons, which is likely to coincide with the building of a new coal terminal at Beira with a similar capacity. The new terminal should be completed by 2015.

In the absence of sufficient capacity on the Sena railway line, companies that have started producing, such as mining group Beacon Hill Resources, have been transporting coal by truck.

Global miner Rio Tinto is exploring the option of using barges down the Zambezi river to get its coal to Beira. The idea is to initially move two-million tons of coal a year, which will later be increased to about 12-million tons.

The shallow Beira port, on Mozambique’s eastern shores, can only accommodate vessels with a capacity of between 30 000 t and 40 000 t, making it difficult to ship the tonnages planned by mining majors such as Vale and Rio Tinto. The port would require dredging to handle Panamax vessels.

Studies are being conducted into the construction of a new coal terminal at Beira, which would have the capacity to handle between 18-million tons and 26- million tons of coal a year.

Coal producers are also looking at building a 20-million-ton coal terminal at Chinde, north of Beira. The port’s construction is planned to coincide with the start-up of production at Rio Tinto’s larger Zambeze project in 2015.

Meanwhile, Mozambique’s Nacala Development Corridor and Vale plan to expand the Nacala railway line and port to increase its capacity from about one-million tons to 30-million tons of coal a year. The expansion will include the upgrade of the railway line between the Moatize basin and Nacala.

Vale has stated that it may use Nacala as an alternative to the Beira port.

Tete is believed to hold one of the world’s largest untapped coal reserves. Despite thermal and coking coal having been found in the country, it is its coking coal, which is a key steelmaking ingre- dient, that holds the biggest allure for investors, given the high prices on the back of limited available global supply.

In November, mining executives gathered at this year’s Coaltrans Mozambique conference, in Maputo, to discuss possibilities and challenges for investing in the coal sector.